If youâ€™re interested in buying property in the Miami real estate market
there have been several shifts in the financing world that have made it possible to do so again. They include creative types of financing that allow you to get in on good deals on Miami luxury properties.
When the mortgage boom was in full swing, there were plenty of different sources of financing available to buyers. Freddie Mac and Fannie Mae were both very loose with their lending and there were plenty of private lenders in the business.
Of course, this turned out to have some unforeseen consequences to it that led to the mortgage crash in 2007-2008. This made the banks tighten up their lending practices and resulted in a situation where many people found themselves having a hard time of it when they looked for ways to finance real estate purchases. Fortunately, there are creative ways to fund a purchase available at present and many investors are turning to them to fund their real estate transactions.
What Youâ€™re Up Against
At the time when the lending frenzy was in full swing, anyone with a pulse and the ability to sign the proper forms could get a mortgage, even if it was unlikely that they could actually afford the property they were taking out lending on. Today, the market is much tighter. Credit scores have to be very high to qualify for lending and the restrictions of mortgages are much tighter in terms of what they can be used to finance. Itâ€™s exceptionally difficult to get a hard money loan these days and banks are unwilling to fund the costs of listing fees and the other expenses involved in moving properties.
Making a Deal Work
If you have securities, you can look into getting funding against these assets. There are some significant advantages to this form of funding, aside from the fact that it makes it possible to get a loan for a house.
Both types of assets, securities and real estate, can appreciate, which allows the buyer to get a solid investment on both ends of the transaction. Because you donâ€™t have to take out the securities, you can stay active in that market and get funding for a home at the same time.
With any type of lending, of course, the amount you pay in interest is a paramount concern. The security based lending options have different interest levels depending upon the amount you finance.
With a lending amount of between $100K and $250K, youâ€™ll be looking at an average interest rate of around 5.25%. That number drops with higher amounts, with a lending amount of $1M having approximately 3% interest as a starting figure. There are other interest options available, of course, including fixed and variable.
For most people, the lower limit on this type of lending will be $100K. There is no maximum limit on the amount you can borrow. The terms of this type of borrowing is usually 3 years. In most cases, you will be able to close the loan without any fees or penalties being incurred.
This is not a credit score based type of lending. Itâ€™s a document-free type of lending since itâ€™s backed by your securities. Most lenders can close these loans in 5 days, sometimes slightly more. There are also no out-of-pocket costs involved with this type of lending, making it even more attractive to many buyers looking to get into the rapidly growing market at present.
What Can I Use?
You can use US Treasury notes, government agency bonds, municipal bonds and many other forms of securities to take out this form of lending. What you cannot use are foreign exchange securities, SBLCs, MTSs, stocks that havenâ€™t any real trading volume, restricted stocks, private company stocks or other real estate. There are a host of products that are available to be used for this type of lending, so itâ€™s always worth it to ask if itâ€™s available to you with your existing securities.
What Itâ€™s Used For
Many investors are using this type of funding to make outright purchases of Miami Beach condos. The desirable terms and absence of penalties for early payoffs make it particularly suitable for these activities.
It can also be used for bridge loans, which are great if you plan on moving into a more desirable form of lending. Because security-based lending has desirable terms, anyway, it eliminates the need to take a very undesirable loan out to act as a bridge and, thus, eliminates much of the stress from this strategy, as well as much of the expense!
It may also be possible to deduct your carrying costs if youâ€™re using your portfolio to purchase real estate. These, and many other advantages, are making this strategy very popular with those individuals getting back into the real estate market.